NBC Buys TV Group Overseas

Wednesday

Aug 29, 2007 at 4:29 AM

Jeff Zucker, the president and chief executive of NBC, said the deal was the first sign of a strategic shift at the company.

BILL CARTER and ERIC PFANNER

NBC Universal announced yesterday the acquisition of a group of international cable television channels owned by Sparrowhawk Holdings of London, a deal that Jeff Zucker, the president and chief executive of NBC, said was the first sign of a strategic shift at the company.

“We want to transfer our portfolio into high-growth businesses and look to move away from businesses that are slower growth,” Mr. Zucker said in a telephone interview. “We are going to acquire and dispose and, at the end of the day, self-fund all of these moves.”

Mr. Zucker did not specify which parts of NBC Universal he intended to shed, and NBC executives emphasized that the portfolio reshuffling was viewed as a long-term project.

He also declined to name any potential acquisition targets. But NBC Universal has been among several media companies, including Viacom, at the center of speculation as potential bidders emerge for the Oxygen cable channel, which caters to an audience of women.

The Sparrowhawk deal — for a group of about 30 pay-television channels, including 18 versions of the Hallmark channel outside the United States — is the first that NBC Universal has closed since Mr. Zucker took the top post in February, and is consistent with his stated intention to expand the international holdings of NBC Universal.

“Media is growing much faster internationally than it is here,” Mr. Zucker said.

The deal is also a play to increase NBC’s revenues. NBC currently takes in about $200 million annually from its internationally distributed television channels, which include CNBC and the Sci Fi Channel. Analysts estimate that Sparrowhawk, which includes 30 or so channels, also earns $200 million a year.

“Our goal is to double our revenues in the next three years, and this represents a big step toward that end,” Mr. Zucker said.

The companies declined to name the deal price, but reports in Britain have put it at about $350 million. A group of investors — the private equity firms 3i and Providence Equity Partners, and the British television executive David Elstein — paid $242 million for the Sparrowhawk channels two years ago.

The channels will give NBC Universal, which is controlled by General Electric, greater exposure to the fast-growing television markets in Asia, Eastern Europe and elsewhere. NBC Universal also plans to introduce new channels and expand existing ones into new markets, network executives said.

With less than 20 percent of its revenue coming from outside the United States, NBC Universal trails other media conglomerates like Walt Disney, which owns ABC, and the News Corporation, which owns the Fox network, in developing a global footprint. Mr. Zucker has said he wants to generate 30 percent of revenue outside the United States by 2010.

“In isolation, this deal isn’t going to get us there,” Peter Smith, president of NBC Universal International, said. “We’re going to need to do a fair bit more.”

Mr. Smith said the international Hallmark channels — the United States version is not included in the deal — would complement NBC Universal’s existing international channels because their programming was popular with women.

In addition to the Hallmark channels, Sparrowhawk owns Movies 24, which shows made-for-TV films in Britain. It also plans to start a channel for children called KidsCo in Central and Eastern Europe, and one in Britain called Diva TV that will be aimed at women.

James L. McQuivey, a media and entertainment analyst at Forrester Research, said an effort by NBC to move toward high-growth assets and away from slower-growth assets would probably move the company toward channels and Web sites aimed specifically toward younger audiences who want “to consume things like comedy and sexual content in small bites.”

If NBC Universal follows this course, he said, “they could end up looking a lot like Viacom.”

Mr. McQuivey said it was impossible to predict which parts of NBC might be disposed of as slow growth, noting that little that NBC owned was growing as slowly as its flagship network, which it was unlikely ever to unload. “They have things like Telemundo and iVillage” which are probably viewed by NBC as faster in growth, he said.

More important, he said, any attempt by NBC to acquire the Oxygen channel would probably be tied to how perfectly it aligned with its iVillage Web site, which also caters to a female audience. “It would be a natural fit between iVillage and Oxygen for things like cross-promotion,” Mr. McQuivey said.

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